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Nestlé to pay up to €100m for rights to baby milk allergy kit

The Financial Times logo The Financial Times 31/05/2016 David Crow in New York

Nestlé is spending up to €100m to acquire the rights to a novel testing kit for babies who are allergic to milk, as the Swiss nutrition group tries to increase awareness of the condition and boost sales of its infant formulas for children with food intolerances. 

The company on Tuesday said it had secured global rights to a diagnostic skin patch test being developed by DBV Technologies, the French biotech group, which will receive an upfront payment of €10m, and a further €90m if the product is approved by healthcare regulators. 

Up to 15 per cent of babies have symptoms that suggest they could be allergic to cow’s milk but far fewer actually suffer from the condition, known as cow’s milk protein allergy, or CMPA, with estimates putting the prevalence at between 0.5-2 per cent. 

Diagnosing CMPA is difficult and currently involves expensive tests of dubious reliability, prompting an increasing number of parents to choose diets that eliminate dairy altogether. The trend is causing concern among companies such as Nestlé that rely on milk products for their sales. 

Milk and baby formula are two of Nestlé’s fastest-growing businesses, according to analysts at JPMorgan. In 2014, infant nutrition accounted for 10 per cent of group sales, and the Swiss group accounts for 23 per cent of the global infant milk market. 

By securing the commercial rights to a diagnostic test for CMPA, Nestlé could benefit in two ways. First, the test might stop parents from removing cow’s milk from their babies’ diets unnecessarily, thus protecting its core infant formula franchise.

Nestle's baby milk 'Beba'© Getty Nestle's baby milk 'Beba'

Second, parents of babies who test positive for the condition using a Nestlé test could opt for its range of products for babies with food allergies, which are sold under the Althéra, Alfaré and Alfamino brand names.

In addition to the €100m, Nestlé will also pay a double-digit percentage of sales to DBV upon regulatory approval of the patch, codenamed Mag1c, which the companies hope to secure in 2021. 

Greg Behar, chief executive of Nestlé’s health science division, said: “This innovation can become the breakthrough diagnostic for CMPA.”

Paris-based DBV Technologies focuses on treatments for allergies, and recently started a large, late-stage trial of a patch for people allergic to peanuts, which analysts believe could generate up to $1bn in sales.

Peanut allergy is one of the most common and dangerous food allergies, affecting more than 5m people in the US and Europe, including 2m children and adolescents.

Prevalence of the condition among US children has risen more than threefold to 1.4 per cent in 2010 from 0.4 per cent in 1997, according to a study by Mount Sinai Hospital in New York — part of a wider increase in allergies that is puzzling doctors.

Dr Pierre-Henri Benhamou, chief executive of DBV, said: “Combining DBV’s innovative and proprietary technology with Nestlé Health Science’s global presence and expertise in nutritional therapies is a synergistic approach that we believe has the potential to improve the overall health of our patients.”

Additional reporting by Scheherazade Daneshkhu

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